New SBA-REFI Program Allows Business to Refinance Commercial Real Estate and Business Properties
Dover, DE: Venture Funding Group announced a new program called SBA-Refi that enables a business to refinance commercial property loans up to $5,000,000.
Via the U.S. Small Business Administration, Venture Funding will offer guaranteed loans to small businesses to refinance commercial real estate debt with impending balloon payments.
The new loans will be offered under the SBA 504 loan program, started Feb. 28. Previously the SBA 504 program did not allow for the refinancing of commercial real estate loans. Loans under the program could only be used to acquire land and buildings, to finance construction of new facilities or renovations. Alternatively, the SBA allowed conversions of existing facilities, and for the purchase of machinery and equipment. The new SBA-Refi opens a whole new world for business to refinance their commercial real estate.
The debt refinancing will be available under the program for two years, using a provision of the Small Business Jobs Act, which was signed into law Sept. 27. Loans eligible to be refinanced must have balloon payments pending before the end of 2012.
The Small Business Jobs Act also permanently increases the maximum loan amount a small business can obtain through the SBA 504 program from $2 million to $5 million. Also, more companies will qualify as small businesses under SBA rules, as the maximum net worth allowed for a company to be considered a small business has been increased from $7.5 million to $15 million and the maximum average annual net income was raised from $2.5 million to $5 million, based on the preceding two tax years.
The 504 refinancing loans will be structured similarly to traditional 504 loans, with a bank or third-party lender providing 50% of the loan, the SBA providing 40% of the loan amount through a certified development company and the borrower providing 10% equity, which may be drawn from the existing asset valuation.
Certified development companies are the SBA's conduit for providing 504 loans.
The program allows the borrower to refinance up to 90% of the current appraised value of the property or 100% of the mortgage, whichever amount is lower, plus refinancing costs. Loan proceeds may not be used for other business expenses, and existing 504 loans or government-guaranteed loans are not eligible to be refinanced.
The refinancing program is only for businesses that can demonstrate that their loans are current and that they have made all required payments over the past 12 months.
